Tax losses Relief
Neha Bhojak
Managing Director at sonkhiya advisory| Expertise in UAE corporate tax | UAE Value Added Tax (VAT) | Virtual CFO Services|
Article 37 -Tax Loss Relief
1.?Offsetting Tax Losses: A tax loss can be carried forward and set off against the taxable income of future periods. However, the amount of tax loss that can be utilized in any subsequent period is limited to?75%?of the taxable income for that period before applying any tax loss relief.
2.??Conditions for Claiming Relief:
·??Tax losses incurred?before the commencement?of the corporate tax law cannot be claimed.
·??Losses incurred by an entity before it becomes a?taxable person?under the law are also not eligible for relief.
·??Losses from activities or assets that are exempt from taxation under the law cannot be offset.
3.??Carryforward Mechanism: The tax loss must first be applied to reduce the taxable income of the subsequent period before any remaining loss can be carried forward to further periods or transferred to another taxable entity.
4.??Transfer of Tax Losses: Article 38 outlines conditions under which tax losses can be transferred between entities, ensuring that such transfers comply with ownership and business continuity requirements.
Implications
The ability to carry forward and offset losses is crucial for businesses, particularly in dynamic economic environments where fluctuations in revenue can occur. This mechanism helps mitigate tax burdens and encourages investment by allowing companies to manage their financial performance over time conclusion, Article 37 plays a significant role in the UAE's corporate tax framework, providing essential relief measures for businesses facing financial challenges while ensuring compliance with established regulations.
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5 个月Neha Bhojak Thank you for the detailed insights on tax loss relief under the UAE Corporate Tax Law in this article. The clear breakdown of Article 37 and its implications for businesses provides a solid foundation for understanding how to manage tax losses effectively. I also noticed that you published another article on this topic on 26th September, which adds valuable new dimensions, such as the continuity requirement for utilizing carried-forward losses and the impact of ownership changes on tax loss relief. These additions are particularly insightful for businesses navigating operational changes or considering restructuring. Together, both articles form a comprehensive guide to tax loss relief, covering both the technical regulations and practical business scenarios. I appreciate how you’ve addressed the nuances in a way that’s helpful for tax planning strategies. I keep looking forward to more such in-depth articles!